A soup kitchen in Athens. Austerity measures have plunged Greece into its worst recession since the second world war. Photograph: Dorija Kljun for the Guardian

The Greek government appeared increasingly shaky on Friday night as its junior partner, the populist Laos party, said it would not support a controversial €130bn (£108bn) loan agreement for the crisis-hit country and several senior ministers resigned.

Reflecting mistrust between debt-stricken Athens and its foreign lenders, the party said the mission chief from the International Monetary Fund, Poul Thomsen, one of the accord's chief architects, should instead be declared "persona non grata".

"We are not going to vote [the package] through," said the Laos leader, Georgios Karatzaferis, ahead of Sunday's make-or-break parliamentary vote on the deeply unpopular wage, pension and job cuts in the deal sponsored by the EU and IMF.

Far from rescuing Greece from bankruptcy, the draconian conditions attached to the financial lifeline would doom it to further poverty, he insisted.

"What has particularly bothered me is the humiliation of the country," he said referring to the refusal of foreign creditors, in particular Germany, to part with any funds before Greece found ways of saving a further €325m, despite the agreement being sealed.

Athens has six weeks to find €14.5bn to cover loans it must repay in March.

"Clearly Greece can't and shouldn't do without the European Union but it could do without the German boot," said Karatzaferis, an unabashed nationalist. "If we want things to go forward, Poul Thomsen must be declared persona non grata for Greece."

Tonight the Greek cabinet endorsed the controversial loan agreement but it is Sunday's vote that will cement Athens' future in the eurozone. Despite waning patience with Greece in Europe, Karatzaferis said the entire EU was suffering under Germany's hegemony.

"Germany decides for Europe because it has a fat wallet and with that fat wallet it rules over the lives of all the southern countries," he said. "Decisions aren't taken in Brussels but from a tower in Berlin from where Merkel co-operates with her satellite countries, the Netherlands, Austria, Finland and unfortunately also Luxembourg."

The extraordinary outburst intensified the political uncertainty engulfing Athens. The technocrat prime minister, Lucas Papademos, was appointed to the helm of a "national unity" government in November to arrange the bailout. Laos's decision to break ranks and withdraw support exacerbated the economic deadlock and sense of mounting confusion in the capital after days of wrangling over the deal.

Papademos began the arduous task of reassembling his cabinet after several ministers stepped down in anger over the austerity measures. Four Laos deputies in his government also tendered their resignation.

Popular fury over the belt tightening spilled onto the streets again as a mass demonstration erupted into running battles between riot police and protesters, and a 48-hour strike shut down the country for a second time this week.

Recalcitrant MPs, in interviews on radio and TV, voiced ambivalence over the conditions attached to the rescue package saying they were as bad as bankruptcy.

Several leading parliamentarians questioned whether, in good conscience, they could endorse the rescue package. "If we accept them we'll be setting in motion the bankruptcy of our country," said Odysseus Boudouris, an MP with the socialist Pasok. "Bankruptcy will be bad for Greece but it will also be bad for Europe, too."

Austerity measures over the past two years, including a barrage of tax rises and wage and pension cuts, have plunged Greece into its worst recession since the second world war. Unemployment exceeded one million this week, hitting a record 20.9%. Manufacturing has all but collapsed with many companies moving across the border into Albania and Bulgaria.

Announcing her resignation as deputy foreign minister for European affairs, Mariliza Xenoyiannakopoulou, a Pasok stalwart, captured the rising panic among Greece's political class.

"Unfortunately the troika and the institutions which it represents have not taken into account the lessons [gleaned] from the first memorandum," she said, referring to the bailout Greece received from the EU, ECB and IMF in May 2010.

"Because, beyond the weaknesses and delays there have been in implementing corrective changes, they [the troika] are attempting to impose measures which ultimately will dramatically increase the recession and push society into ever greater despair."

The coalition government and the political parties backing it had come under intense pressure to put their commitment in writing to the cost-cutting demanded in return for rescue funds. The latest bailout agreement also contains a private sector bond swap that will slice €100bn from the country's €350bn debt pile in the hope of bringing it down to 120% of GDP by 2020.

Ahead of general elections possibly as early as April, Karatzaferis, whose popularity has plummeted since Laos joined the government, and Antonis Samaras, who leads the conservative New Democracy party, have balked at doing so. Late on Friday it remained unclear whether Samaras, whose popularity has shot up on the back of fervent opposition to the fiscal remedies, would sign the loan deal.

With anti-German sentiment rising in Greece, it was yet another case of political posturing in the debt drama.

The main players

Lucas Papademos A former vice-president of the ECB, the PM is also a well-known macro-economist who gave up a Harvard teaching post to head the interim government. He was governor of the Bank of Greece when the country entered the eurozone in 2001, and has led talks between Athens and the troika.

George Papandreou The 59-year-old Pasok leader and former PM, who was born in the US, was criticised for failing to implement the reforms needed to modernise the Greek economy. Under the influence of US advisers, he stunned Europe by calling for a referendum over the bailout accord. It sealed his demise.

Antonis Samaras The New Democracy party leader, also a Harvard graduate, has presided over a comeback for his conservative party by opposing austerity reforms. Samaras, whose advisers are hard right, spent 16 years in the wilderness after being ejected from the party for his nationalist stance on Macedonia. He was a room-mate of Papandreou when both attended Amherst College as undergraduates in the US, but although friends they have widely divergent world views.

Georgios Karatzaferis The 67-year-old Laos party leader is a populist whose political career was preceded by stints running a modelling agency and media company whose far-right views reflect those of Laos, the party he created in 2000. A former bodybuilder, he has made an odd bedfellow in Greece's unity government.